I agree that it would be a mistake to not offer new options. The mistake I am referring to is removal of over $5,000 worth of standard features and the doubling of prices on many options on the around 200 owners that have "locked-in." According to the agreement I have the lock-in took you from a refundable deposit to a contract to buy a vehicle as listed. My list clearly shows all the locked-in prices. Unless Tom is wrong and he was not required to accept the new terms and conditions for his car to enter production then someone has indeed made a terrible mistake
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I agree that it would be a mistake to not offer new options. The mistake I am referring to is removal of over $5,000 worth of standard features and the doubling of prices on many options on the around 200 owners that have "locked-in." According to the agreement I have the lock-in took you from a refundable deposit to a contract to buy a vehicle as listed. My list clearly shows all the locked-in prices. Unless Tom is wrong and he was not required to accept the new terms and conditions for his car to enter production then someone has indeed made a terrible mistake
Tesla folks, take note. Over on the TTAC page the flamers are going on about a "3000 extension cord". There is no one defending you.
The people who can afford it least are the ones online singing your praises. Now in this thread and on ABG, 3 writers have canceled their car because of this bonheaded move.
Is it worth it?
The people who can afford it least are the ones online singing your praises. Now in this thread and on ABG, 3 writers have canceled their car because of this bonheaded move.
Is it worth it?
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Another site picks it up: DailyTech - Tesla Motors Raises Roadster Price, Angers Those Who Pre-Ordered
stopcrazypp
Well-Known Member
Looks like Jalopnik picked it up also:
Tesla: Tesla Increases Prices On Already-Ordered Roadsters
Autoblog has it too:
http://www.autoblog.com/2009/01/20/tesla-raises-prices-on-roadster-options-sparks-controversy-ang/
On the one hand, it pains me to see all the Tesla haters get what they want, but on the other hand, we need to get this into the public so that Tesla Motors will fix it (hopefully they do).
Tesla: Tesla Increases Prices On Already-Ordered Roadsters
Autoblog has it too:
http://www.autoblog.com/2009/01/20/tesla-raises-prices-on-roadster-options-sparks-controversy-ang/
On the one hand, it pains me to see all the Tesla haters get what they want, but on the other hand, we need to get this into the public so that Tesla Motors will fix it (hopefully they do).
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Certainly there seem to be a lot of naysayers jumping on this, which is unfortunate as we are now getting the "told you so" digs on all these sites. If it is the case that Tesla need to show better margins to attract the next round of investment, I'm sure most people here would understand that. No one (here) wants to see the company struggle or worse. But it has been done in a back-to-front manner and the decision to include locked-in customers as well as those further down the list seems questionable. I wonder if a lack of new orders is ultimately behind this?
I'm hoping the silence is a sign that they are considering peoples' feedback and looking at what some alternative (better?) scenarios will do to the business, but all the while the story is being picked up by more and more outlets and it is only a matter of time before it appears outside the car "blogosphere". Hopefully we will get a statement in the very near future.
SteveF
Member
I don't know how to link to this, but here is Elon's response (sent via e-mail to owners).
"A much fuller account of the history of Tesla is worth telling at some point, but for now I will just talk about the essentials of why we needed to raise prices on options. Fundamentally, it boils down to taking the tough steps that are difficult but necessary for Tesla to be a healthy company and not fall prey to the recession.
When the initial base price, for cars after the Signature 100 series, of $92k was approved by the board a few years ago, it was based on an estimated vehicle cost of roughly $65k provided by management at the time. This turned out to be wrong by a very large margin.
An audit by one of the Series D investors in the summer of 2007 found that the true cost was closer to $140k, which was obviously an extremely alarming discovery and ultimately led to a near complete change in the makeup of the senior management team. Over the past 18 months, observers will note that Tesla has transformed from having a senior team with very little automotive experience to one with deep automotive bench strength. We now have executives with world class track records running everything from design to engineering to production to finance.
To bring the cost of the car down, we have reengineered the entire drivetrain, which is now at version 1.5 and will be at version 2 by June. The body supplier was also switched out from a little company that was charging us nutty money and had a max production of three per week to Sotira, who supplies high paint quality body panels to Lotus, Aston Martin and others. In the process, we had to pay several million dollars for a whole new set of body tooling, as the old tooling had been made incorrectly. The old HVAC system was unreliable and cost almost as much as a new compact car, so also had to be replaced. The wiring harness, seats, navigation system and instrument panel also had to be modified or replaced.
After reengineering and retooling virtually the entire Roadster and completely restructuring our supply chain, we are now finally coming to the point where the variable cost of the car (to be clear, this excludes fixed cost allocation) is between $90k to $100k. With a lot of additional effort by the Tesla team and the help of our suppliers, we should be at or below $80k by this summer. There is some variability here due to exchange rate shifts. Although we gain an automatic currency hedge by selling in both Europe and the US, we are still vulnerable to the Yen, which is very strong right now.
Obviously, this still creates a serious problem for Tesla in the first half of 2009, given the $92k to $98k price of most cars delivered over this time period. The board and I did not want to do a retroactive increase of the base vehicle price, as that would create an unavoidable hardship for customers. Instead, apart from a $1k destination charge increase to match our true cost of logistics, we only raised the price of the optional elements and provided new options and a new model (Roadster Sport) to help improve the average margin per car.
The plan as currently projected, and which I believe is now realistic, shows a high likelihood of reaching profitability on the Roadster business this summer. By that time, we will be delivering cars that have a base price of $109k plus about $20k or so of options (having worked our way through the $92k to $98k early buyers) at a rate of 30 per week. We are fortunately in the position, rare among carmakers, of not having to worry too much about meeting 2009 sales targets, as we are already sold out through October and have barely touched the European market.
My paramount duty is to ensure that we get from here to there without needing to raise more money in this capital scarce environment, even if things don't go as well as expected. I firmly believe that the plan above will achieve that goal and that it strikes a reasonable compromise between being fair to early customers and ensuring the viability of Tesla, which is obviously in the best interests of all customers. It’s also important to note that the price increases will affect 400 customers, all of whom will take delivery after Jan. 1 and receive a $7,500 federal tax credit. We made the pricing changes to ensure the viability of Tesla in the long term, regardless of government incentives, but we hope the credit will offset the increase for most customers.
There is one additional point that relates to the government loans that Tesla is seeking for the Model S program, a much more affordable sedan that we are trying to bring to market as soon as possible. A key requirement is that any company applying be able to show that it is viable without the loans. If we allow ourselves to lose money on the cars we are shipping today, we place those loans at risk. Mass market electric cars have been my goal from the beginning of Tesla. I don't want and I don't think the vast majority of Tesla customers want us to do anything to jeopardize that objective."
Elon Musk
CEO & Product Architect
"A much fuller account of the history of Tesla is worth telling at some point, but for now I will just talk about the essentials of why we needed to raise prices on options. Fundamentally, it boils down to taking the tough steps that are difficult but necessary for Tesla to be a healthy company and not fall prey to the recession.
When the initial base price, for cars after the Signature 100 series, of $92k was approved by the board a few years ago, it was based on an estimated vehicle cost of roughly $65k provided by management at the time. This turned out to be wrong by a very large margin.
An audit by one of the Series D investors in the summer of 2007 found that the true cost was closer to $140k, which was obviously an extremely alarming discovery and ultimately led to a near complete change in the makeup of the senior management team. Over the past 18 months, observers will note that Tesla has transformed from having a senior team with very little automotive experience to one with deep automotive bench strength. We now have executives with world class track records running everything from design to engineering to production to finance.
To bring the cost of the car down, we have reengineered the entire drivetrain, which is now at version 1.5 and will be at version 2 by June. The body supplier was also switched out from a little company that was charging us nutty money and had a max production of three per week to Sotira, who supplies high paint quality body panels to Lotus, Aston Martin and others. In the process, we had to pay several million dollars for a whole new set of body tooling, as the old tooling had been made incorrectly. The old HVAC system was unreliable and cost almost as much as a new compact car, so also had to be replaced. The wiring harness, seats, navigation system and instrument panel also had to be modified or replaced.
After reengineering and retooling virtually the entire Roadster and completely restructuring our supply chain, we are now finally coming to the point where the variable cost of the car (to be clear, this excludes fixed cost allocation) is between $90k to $100k. With a lot of additional effort by the Tesla team and the help of our suppliers, we should be at or below $80k by this summer. There is some variability here due to exchange rate shifts. Although we gain an automatic currency hedge by selling in both Europe and the US, we are still vulnerable to the Yen, which is very strong right now.
Obviously, this still creates a serious problem for Tesla in the first half of 2009, given the $92k to $98k price of most cars delivered over this time period. The board and I did not want to do a retroactive increase of the base vehicle price, as that would create an unavoidable hardship for customers. Instead, apart from a $1k destination charge increase to match our true cost of logistics, we only raised the price of the optional elements and provided new options and a new model (Roadster Sport) to help improve the average margin per car.
The plan as currently projected, and which I believe is now realistic, shows a high likelihood of reaching profitability on the Roadster business this summer. By that time, we will be delivering cars that have a base price of $109k plus about $20k or so of options (having worked our way through the $92k to $98k early buyers) at a rate of 30 per week. We are fortunately in the position, rare among carmakers, of not having to worry too much about meeting 2009 sales targets, as we are already sold out through October and have barely touched the European market.
My paramount duty is to ensure that we get from here to there without needing to raise more money in this capital scarce environment, even if things don't go as well as expected. I firmly believe that the plan above will achieve that goal and that it strikes a reasonable compromise between being fair to early customers and ensuring the viability of Tesla, which is obviously in the best interests of all customers. It’s also important to note that the price increases will affect 400 customers, all of whom will take delivery after Jan. 1 and receive a $7,500 federal tax credit. We made the pricing changes to ensure the viability of Tesla in the long term, regardless of government incentives, but we hope the credit will offset the increase for most customers.
There is one additional point that relates to the government loans that Tesla is seeking for the Model S program, a much more affordable sedan that we are trying to bring to market as soon as possible. A key requirement is that any company applying be able to show that it is viable without the loans. If we allow ourselves to lose money on the cars we are shipping today, we place those loans at risk. Mass market electric cars have been my goal from the beginning of Tesla. I don't want and I don't think the vast majority of Tesla customers want us to do anything to jeopardize that objective."
Elon Musk
CEO & Product Architect
Bradleybang
Member
Translation: This was the fault of previous management.
I don't think that's a good way to start such a letter. Customers are pissed, it's better to take responsibility for mistakes (as a company) instead of trying to place blame on particular individuals.
As could be expected, this ignores the fact that they've effectively changed the base price by removing value.
From two days ago:
I think the main problem here is that the explanation should have come before the action, not the other way around. I have to say that this really was a huge mistake. I think many of the upset customers would have understood if this had been handled with a bit more humility and less hubris. Instead they feel disrespected and that their trust has been violated.
I really hope that Tesla can bounce back from this.
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I must say I do wonder if this is the difference of opinion that caused Darryl Siry to leave? This is a PR disaster of monumental proportions. At this point they can be viewed as either so desperate for cash that they are going for a last ditch money grab or else so untrustworthy that now that the rich and famous have their cars they can just stick it to everyone else.
Donaker,
That is what I said from the beginning. I am sure that DS will not weigh in on this subject but I sure wish he would. Best of luck to them in straighteiing out this fine mess they have created. I am sure that it will be forgotten sometime but certainly not any time soon. Hopefully they can survive until it blows over.
That is what I said from the beginning. I am sure that DS will not weigh in on this subject but I sure wish he would. Best of luck to them in straighteiing out this fine mess they have created. I am sure that it will be forgotten sometime but certainly not any time soon. Hopefully they can survive until it blows over.
Well, I'm glad an explanation is out there, but it sure should have come first.
With a slowdown in new orders upon which they could have increased margins, it seems to me they had two options:
1) Lose money on every car, at least until they can get costs down to $80k, but potentially on all 1200 on the waiting list if this takes longer than expected. Thus putting in doubt the ability of the company to raise new money and ultimately its survival.
2) At least try to break even on existing orders, knowing full-well the PR storm that would follow. Ensure Tesla is around in 5+ years' time.
Given the above, it was probably the lesser of two evils. I know that is no comfort if you are involved directly and as I said, it probably could have been handled better (but then hindsight is a wonderful thing). At least the company has a better chance of being there to provide aftersales when you need it and hopefully at some point a Model S for the rest of us. With a bit of luck, some minor event going on in Washington DC will keep this out of the mainstream press...
With a slowdown in new orders upon which they could have increased margins, it seems to me they had two options:
1) Lose money on every car, at least until they can get costs down to $80k, but potentially on all 1200 on the waiting list if this takes longer than expected. Thus putting in doubt the ability of the company to raise new money and ultimately its survival.
2) At least try to break even on existing orders, knowing full-well the PR storm that would follow. Ensure Tesla is around in 5+ years' time.
Given the above, it was probably the lesser of two evils. I know that is no comfort if you are involved directly and as I said, it probably could have been handled better (but then hindsight is a wonderful thing). At least the company has a better chance of being there to provide aftersales when you need it and hopefully at some point a Model S for the rest of us. With a bit of luck, some minor event going on in Washington DC will keep this out of the mainstream press...
Exactly! This just adds additional insult to the entire situation. He didn't even acknowledge the fact that the base vehicle I agreed to buy has been increased by $5,700 plus the $1,000 added to the destination charge as well as the option increases.
Yes most definitely. This is the group that has been clamoring for the opportunity to put deposits down on the Model S and also to invest in the company. Now even those who already have their car and are not directly affected by this have indicated that they would be far less inclined to do either.
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shark2k
Member
Since I'm more of an outsider looking in, i.e., not actually buying or know anyone personally buying a Tesla Roadster, I got a quick question. Was the destination charge increased to $1,000 or was there an extra $1,000 added? If I recall, I saw the destination charge was $950. Is it now $1,950 or $1,000? Just wanted some clarification.
As to the price increase, I'm not gonna say much on it besides that I think they definitely did this the wrong way. But I'm also hoping they can some how redeem themselves because I was very interested in possibly buying a Model S, but after this little fiasco, I am a little bit more skeptical.
-Shark2k
As to the price increase, I'm not gonna say much on it besides that I think they definitely did this the wrong way. But I'm also hoping they can some how redeem themselves because I was very interested in possibly buying a Model S, but after this little fiasco, I am a little bit more skeptical.
-Shark2k
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Possible Solutions or Suggestions
This is a re-post of a comment that I made on Tesla Founders Blog:
"One suggestion:
How about giving a voucher, or certificate, equal in value to the price difference between the pre-options increase Roadster and the post-options increase Roadster, that is redeemable against the future purchase of a Model S, or a 2010MY Roadster? The voucher should be transferable so that the current Roadster customers can gift it or sell it, if they so choose.
It would allow TM to show the DOE that they are profitable on the Roadster, without customers feeling like they are being mistreated too badly in the short term. It might also result in additional Model S customers in the future."
Any thoughts as to other possible solutions?
Roadster customers: What would make you feel better about this price increase situation?
This is a re-post of a comment that I made on Tesla Founders Blog:
"One suggestion:
How about giving a voucher, or certificate, equal in value to the price difference between the pre-options increase Roadster and the post-options increase Roadster, that is redeemable against the future purchase of a Model S, or a 2010MY Roadster? The voucher should be transferable so that the current Roadster customers can gift it or sell it, if they so choose.
It would allow TM to show the DOE that they are profitable on the Roadster, without customers feeling like they are being mistreated too badly in the short term. It might also result in additional Model S customers in the future."
Any thoughts as to other possible solutions?
Roadster customers: What would make you feel better about this price increase situation?
Tdave
Member
Most of the talk is about the price increase for locked-in buyers. But what about non locked-in buyers like me? I'm a middle of the pack 2009 "owner" who has $60k on deposit. The first $5k deposit locked in price. The next $55k locked in a production slot. I have the 2009 price list on file that they sent me with my welcome package, and also saved from the website at the time I gave my deposit. That price list includes items on it that have now increased in price.
I fully expect Tesla to honor the prices on the price list that I locked in over 6 months ago. That's the whole point of the first $5k deposit that LOCKED IN PRICE. I'll repeat. The whole point of the first $5k deposit is to lock in the prices on that price list.
What would be smart of Tesla would be to offer an extended options list at new prices to help them increase profits. I thought that's what they were doing -- entice me to spend more on performance and luxury options, above and beyond what I was already planning to spend.
But instead they're increasing prices on items already on the price list back when I made my deposit. To me that seems like breach of contract. I'm not a lawyer, so I don't know for sure, but it sure doesn't pass the smell test.
When I first got the notice of new options, I was excited about the new choices I had available. Now I'm pissed after learning what has really happened.
Way to go Tesla, turning a great positive into a huge negative.
I fully expect Tesla to honor the prices on the price list that I locked in over 6 months ago. That's the whole point of the first $5k deposit that LOCKED IN PRICE. I'll repeat. The whole point of the first $5k deposit is to lock in the prices on that price list.
What would be smart of Tesla would be to offer an extended options list at new prices to help them increase profits. I thought that's what they were doing -- entice me to spend more on performance and luxury options, above and beyond what I was already planning to spend.
But instead they're increasing prices on items already on the price list back when I made my deposit. To me that seems like breach of contract. I'm not a lawyer, so I don't know for sure, but it sure doesn't pass the smell test.
When I first got the notice of new options, I was excited about the new choices I had available. Now I'm pissed after learning what has really happened.
Way to go Tesla, turning a great positive into a huge negative.
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JRP3
Hyperactive Member
I'm not telling Elon how to spend his money but isn't he capable of propping up HIS company himself, and not counting on his locked in customers to do so?
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